Alibaba says its 'big data' helped bust 400-plus counterfeit rings

More than 400 counterfeit rackets have been disrupted as a result of big data and intelligence provided to authorities by e-commerce giant Alibaba.

The crackdown on criminal counterfeit rings, which netted $205m-worth of fake goods in China and led to 332 arrests, is part of Operation Cloud Sword, a joint effort between Alibaba and China's law enforcement authorities started in 2015.

The operation is spearheaded by enforcement agencies in Zhejiang Province and leverages big data and advanced technologies to help offline investigations to remove illicit groups involved in counterfeiting.

Results from the four-month investigation between April and July this year have now been published by the online marketplace.

Alibaba believes the report highlights the role big data will play in the future of intellectual property enforcement actions, and hopes the report will go some way to pacifying critics who claim the marketplace is not doing enough to crackdown on counterfeits.

"Cloud Sword is a perfect showcase of Alibaba's strength as a technology company, using complex algorithms, machine learning, optical character recognition, and mapping technologies to automatically generate leads to help law enforcement determine the source of a fake product," a spokeswoman said in a statement.

The operation disrupted 417 counterfeit production rackets and storage facilities across 12 Chinese provinces and municipalities resulting in the seizure of fake goods worth RMB 1.43bn ($205m). More than 30 categories of counterfeit products across 131 brands were detected including Starbucks, Converse, Adidas, Nike, Mobil, Samsung and Philips.

In one raid of 13 factories and shops, 15,000 fake Kingston and Samsung computer RAM modules valued at RMB 120m ($17m) were seized, 58 online stores selling the fake modules were shut down and 16 people arrested in connection with the counterfeit ring. Operation Cloud Sword also disrupted a counterfeit cigarette network and fake pesticides that was being exported to Cambodia.

According to Alibaba, the beauty of the anti-counterfeiting technology use in Operation Cloud Sword allows authorities to not only find the sellers of the fake goods but to track the supply chain back to where the goods were produced.

The main anti-counterfeiting technology used was machine learning, which analyses a number of data points, examining such things as price, transaction records, product-release patterns and consumer complaints to generate a score, which can flag concern over the authenticity of the seller and the product.

Another system looks at seller behaviour, product information, consumer reviews and user reports as well as hundreds of millions of data points per second to identify potential fakes. Meanwhile, optical character recognition is used to scan and analyse images and logos to pick up discrepancies.

Potential counterfeiters and fake products are then analysed further, taking into account national identification card details and account information with seller behaviour, such as internet services used, shipping and return addresses, as well as sellers Alipay accounts.

In 2015, the first Operation Cloud Sword, between May and August, provided 385 leads generated from Alibaba's big data, which led to the arrest of more than 300 suspected counterfeit gang members and disrupted 244 counterfeit operations.

The Alibaba system shows that using big data can take IP enforcement to the next level, said Matthew Bassiur, head of global intellectual property enforcement at Alibaba.

"We're combing and analysing an immense amount of data on those who attempt to traffic in counterfeit goods across our platforms. With big data analytics and other information at our disposal, we will identify the counterfeiters online and assist law enforcement authorities in holding these bad actors accountable for their illicit acts."

Furthermore, it cuts off the original supply of counterfeits, he added. "Counterfeiters are on notice. We are using big data to help authorities identify them, their manufacturing facilities and their distribution locations. Attempting to sell counterfeits online may very well lead to their arrest and imprisonment offline."

Operation Cloud Sword will now be expanded to other provinces to form the Cloud Sword Alliance.

"As a partner of the Cloud Sword Alliance, Alibaba not only wants to crack down on counterfeit goods on its platforms, it also wants to crack down on counterfeit goods for the entire industry and society at large, and cut off their sales channels via messaging tools such as QQ and WeChat," the company said in the report.

"Alibaba regards the crack-down on counterfeit goods as contribution to common social goods. That is why it will not only actively take on such responsibilities, but will also continue to take positive actions and work together with the authorities by leveraging its big data capabilities."